We’ve discussed all the reasons for diversifying away from the Dollar. Now, we’ll quickly lay out some practical ways for exactly how you can do so. We’ve spoken at length about gold and silver as possibilities, but let’s revisit sovereign currencies here.
There are a number of ways to hold foreign currencies. It’s important that you really educated yourself on the advantages and risks (more than we can do for you in this blog post) before investing in this way. However, we want to help you start this process here. You could open an account in a foreign country. There are also a number of ways that you can do this within US institutions. Some brokerage accounts allow you to settle trades and hold cash in a number of different currencies.
Other companies offer CD’s that allow you to keep money in foreign currencies. A number of these pay more interest that the US is currently paying. As always, be careful which currencies you put your capital in and be aware of the risk that that currency can decrease in value against the Dollar. Some of these companies also offer a number of CD’s that hold a basket of 3-6 different currencies to diversify away from the Dollar in multiple currencies within one product.
There are also offers mutual funds which give you professional money management that aim to actively diversify your funds outside of the US Dollar in countries which have sound monetary policy. Each fund will have different objectives, so you want to make sure you’re dealing with one which has the same objective as you. Some are in line with what we’ve been talking about and focus on hard currencies and might even hold a small percentage of gold.
These might be western or eastern focused or be truly diversified around the world. Some of these will have holdings in currencies which are currently pegged to the Dollar, for example Chinese Yuan or Hong Kong Dollar. Eventually the Yuan will have to float freely (it is currently tethered to the US Dollar for the most part) and when this happens it should explode upward in value. The Hong Kong Dollar does not face as much pressure to un-peg, but it could at anytime unhinge from the Dollar and shoot up in value. These options are interesting to us because if nothing dramatic happens to the Dollar then the value should stay relatively constant in Dollar terms. But if the Dollar goes into a free fall, these countries could stop the peg and then your wealth would be saved.
Some funds are pure foreign currency plays while others give the manager the ability to buy the Dollar if he feels it will have a short term increase in value as we’re seeing today.
This post is Part 13 in the series A Few Ways to Prepare. To continue with this series, click on Pt 14. To use this as a growth tool to better understand your own calling, you might start by reading Pt 1, Pt 2, Pt 3, Pt 4, Pt 5, Pt 6, Pt 7, Pt 8, Pt 9, Pt 10, Pt 11 and Pt 12.
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